3 Innovations in Payment Technology

by Santosh

Payment technologies are at the heart of the Internet economy. From the consumer’s perspective, the simpler you make it for me to pay, the more likelier I am to open up my wallet. Ever since Paypal and Amazon’s one-click checkout, there have been several innovations (or iterations) on the idea of making payments.

In India, Indian consumers are used to cash-on-delivery, pulling out a credit card, or logging into their net banking accounts to make a payment online, here’s a different take on how US consumers are paying up.

Amazon Global Payments. Amazon get the importance of simplifying payments online. Their first attempt at solving this problems is to offer a global payment system that allows you to accept payments securely in any currency wherever in the world the end-user might be.

Their approach also exposes an interesting payment gateway feature – an escrow service to app developers. It’s a simple and old idea, payments are ‘held’ by the provider until a set of conditions are met. Only when the conditions are met is the payment credited to the merchant. The idea has been around for decades but has only recently been exploited by an innovative business called Kickstarter. On Kickstarter the average consumer can donate $5 and upwards for a project that he would like to fund to completion. Project owners only receive the money after they’re minimum required funding amount is achieved. In the middle of all this, Amazon is responsible for holding the money, and refunding it back to the donors if the project requirements are not met. With this technology, Kickstarter is able to ensure that the best projects get the money they deserve and efficiently utilize the resources of the community.

Square. So maybe you aren’t an Amazon, or maybe you believe that only Amazon can change how payments are made. Square is the one startup on this list with a grand vision based on a single innovation.

Accept credit cards with your mobile.

Square’s technology makes it possible to turn any smart-phone into a credit card swiping machine. Sound’s obvious right? All you need to do is jack in this small magnetic strip reader into your 3.5mm earphone jack on your phone.

Now consider this – with Android, you can have the Square app installed on a smart phone that costs you less than Rs. 8,000 (or ~$200). Once you are setup, you can accept payments wherever you may be. Still think this is small? Square recently received $100Mn investment, which I think will be used to go global.Their competitors include Intuit who realized, if only a little too late, the impact this could have on small and medium sized businesses across the world.

So any bets on when cash-on-delivery will change to card-me-on-delivery?

Bill Me Later is another single-innovation based service that enables a post-paid billing option for customers. While I would like to try this out myself, I am not a stranger to the idea of ‘book me now, but pay later’. It can be especially powerful if you consumers to purchase from their mobiles, or in a public place without having to pull out a credit card and go through the works of filling out 4 fields.